Currency report: Key resistance breached

Expectations that the US Federal Reserve will jack up interest rates for the 17th straight time on June 29 hit all emerging markets' currencies, by making yields of riskier assets less attractive.

The problem for the Polish financial markets was compounded by a rumor that Finance Minister Zyta Gilowska, a bastion of sound fiscal policy, was leaving the government.

On Tuesday the EUR/PLN cross broke the psychological resistant level at zł.4 and rose to zł.4.055 on Friday. The złoty lost ground after the rating agency Standard & Poor's lowered Hungary's foreign currency rating to BBB+ because of a continued deterioration of public finances. The EUR/PLN could now reach zł.4.12, and the USD/PLN could go to zł.3.30.

In the long term the złoty should be supported by good economic data, such as a low current-account deficit, solid economic growth and low inflation. CPI rose to 0.9 percent year-on-year in May from 0.7 percent in April, slightly above the 0.8 percent analysts forecasted.

Marek Węgrzanowski,

X-Trade Brokers Dom Maklerski